Inflation held steady in February, maintaining price increases at elevated levels in the weeks before the U.S.-Israeli war with Iran sent gasoline prices surging and stoked heightened concern about affordability. The reading matched economists’ expectations.<\/p>\n
Prices rose 2.4% in February compared to a year earlier, leaving the inflation rate unchanged from January, U.S. Bureau of Labor Statistics data showed. Inflation stands slightly higher than the Federal Reserve’s target rate of 2%.<\/p>\n
Oil prices have surged since the war with Iran late last month, ratcheting up costs for gasoline and airfare, and threatening to push up prices for a vast array of goods reliant on diesel-fuel transport, some analysts previously told<\/a> ABC News.<\/p>\n A lackluster jobs report last week showed<\/a> the U.S. economy lost 92,000 jobs in February, which marked a reversal of fortunes for the labor market and erased most of the job gains recorded in 2026.<\/p>\n The unemployment rate ticked up from 4.3% in January to 4.4% in February, the BLS said. Unemployment remains low by historical standards.<\/p>\n Sluggish hiring has coincided with elevated inflation, threatening a period of “stagflation<\/a>.”<\/p>\n Those economic headwinds helped set the conditions before the outbreak of war with Iran, which spiked oil prices and risked price increases for a host of diesel-fuel transported goods.<\/p>\n U.S. crude oil prices hovered at about $86 per barrel on Tuesday, surging more than 30% since a month earlier.<\/p>\n The average price of a gallon of gasoline in the U.S. soared to $3.53 on Tuesday from $2.92 a month prior, AAA<\/a> data showed.<\/p>\n Still, the overall economic picture remains mixed.<\/p>\n A government report in February on gross domestic product (GDP) showed<\/a> the economy grew at a tepid annualized pace of 1.4% over the final three months of 2025. That reading indicated a dramatic cooldown from the strong annualized growth of 4.4% recorded in the previous quarter, U.S. Commerce Department data showed.<\/p>\n The Iran war threatens to slow U.S. economic growth since oil-driven price increases could weigh on consumers and businesses, analysts previously told<\/a> ABC News.<\/p>\n The potential combination of higher inflation and slower growth could also pose a challenge for the Fed, putting pressure on both sides of its dual mandate to manage prices and maintain maximum employment.<\/p>\n If the Fed opts to lower borrowing costs, it could spur growth but risk higher inflation. On the other hand, the choice to raise interest rates may slow price increases but risks a cooldown of economic performance.<\/p>\n